Source: Investment Law Watch

Investment Law Watch analyzes the US Securities and Exchange Commission’s (SEC) emerging approach to regulating artificial intelligence in financial services, as announced on 31 March 2025. The SEC is responding to growing concerns about the use of complex AI systems in investment decisions, algorithmic trading, and robo-advisory platforms, which may pose systemic risks or lead to discriminatory outcomes.

The article explains that the SEC is drafting new compliance standards focused on algorithmic transparency, explainability, and risk mitigation. Key areas include monitoring AI-driven advice platforms, establishing guardrails for high-frequency trading, and enhancing accountability for AI model outcomes. The initiative reflects broader efforts to align AI usage with existing securities law principles, including investor protection and market fairness.

Legal experts note that while enforcement mechanisms are still in development, the SEC’s early steps suggest a proactive regulatory posture that may influence international frameworks. Financial firms are encouraged to audit and document AI operations in anticipation of future obligations.